BOOKKEEPING AS OPPOSED TO ACCOUNTING FOR SMALL BUSINESSES

Is bookkeeping and accounting the same thing? Bookkeeping and accounting are poles apart despite obvious similarities where accounting can on occasion morph into bookkeeping. Essentially, they are closely linked because you cannot have one without the other. An accountant will build on the financial information provided by the bookkeeper. As business owners, it is important to know the differences and similarities and how to determine which to hire.

Bookkeeping is the daily task of accurately classifying and recording financial transactions, for example, sales invoicing, recording of customer receipts, recording of stock purchases, expenses and so on, whereas accountants, also having solid experience in bookkeeping, have a wealth of additional broad-based business skills such as financial reporting, tax and company law knowledge and will use the information provided by the bookkeeper to create financial statements, analyse and interpret the financial information and share advice with the business owner, prepare tax returns, conduct audits and forecast future business needs. Accountants hold degrees majoring in accounting and those that have also completed articles in an accounting and audit firm are more likely to have greater all-round experience whereas bookkeepers on the other hand do not require a degree. Bookkeepers are therefore often supervised by accountants.

When Should A Small Business Seek Professional Accounting Support?
Smaller businesses who hire an accounting professional at start-up have statistically demonstrated a far higher percentage of success and business growth compared to those that don’t. Using accountants partially because you think that you are saving money …. taking shortcuts …. business owners miss the strategic advantage and competitive edge that big business does naturally.

At start-up, an accountant can advise on the most suitable legal entity in which to carry on your trade, create a business and financial plan, ensure that your business is compliant by registering it with the various legal bodies and set up customized accounting systems relative to your industry and your needs, ultimately saving you time and money in the long term.

Does A Small Business Need A Bookkeeper Or An Accountant?
The simple and straight-forward answer is that they need both. Then again, a small business usually has too few transactions to warrant a full-time bookkeeper. Furthermore, smaller businesses lack confidence that they are complying fully with the complex tax and company legislation without falling fowl of the law. Nevertheless, business owners need more than just compliance, yet they do not ask for regular financial reports or management accounts. So, what do we see most businesses doing? They work in the dark.

Accountants cannot provide any business advise or identify why your business is not making money without accurate monthly management accounts. They are not physic … they do not have crystal balls, so without management accounts, they are just as much in the dark as you are.

The good news is that accountants, whose clientele are concentrated in the small and medium business sector, will also provide bookkeeping support in specific areas along with accounting services and business consulting that does not cost the earth as you only pay for the hours that they work, which will free up your time and allow you to focus on what matters, your business.

How To Choose The Right Bookkeeping And Accounting Support For Your Small Business?
Now that you know that a small business needs a bookkeeper and an accountant all rolled up into one package, a one-stop shop in a way, it is important to choose the right person otherwise you could be missing a great deal, especially when you use a cheap accountant.

Independent freelance accountant
Hiring a one-man accountant might be an affordable option but its biggest drawback is that they have no technical or physical support, running the risk that they are not up to date, the range of services may be limited and they could leave you in the lurch if they get ill or take a month’s holiday.

Hiring a firm of accountants
It is usually a good deal more expensive to hire a firm of accountants but the upside is that they keep themselves up to date with changing laws and new technologies and there is continuity should the person dealing with your business leave the firm or take ill.

Appointing an accountant in a franchise
An accounting franchise is a type of business that is owned and operated by an individual accountant (franchisee), but is branded and overseen by a much larger, usually national, company (franchisor).
By hiring an accountant in a franchise structure, the smaller to medium business will receive the best of both worlds, affordable fees as offered by independent freelance accountants but with the added value of big firm expertise, a structure that only the national Business Accounting Network group can provide, giving you the comfort of knowing that another accountant franchisee will easily and smoothly step into your accountant’s shoes should he or she become ill or take an extended holiday.